Detectives investigating the bombing charged the man with murdering those who died in the explosion "and a number of other offences", said a Police Service of Northern Ireland (PSNI) statement.
British media, including the BBC, named the man as the senior republican figure Seamus Daly, from Culloville, County Monaghan.
No one has ever been convicted in a criminal court over the attack in the County Tyrone town.
Daly was arrested in the city of Newry area on Monday, and charged at Antrim police station late yesterday.
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He will appear at Dungannon Magistrates Court early Au.
A civil judge at Belfast High Court last year ruled that Daly and Colm Murphy could be held responsible for the attack by the Real IRA, a paramilitary splinter group of the now-disbanded Irish Republican Army.
The judge said the evidence against the pair, primarily from mobile phone records, was "overwhelming".
Michael Gallagher, whose son Aidan was killed in the bombing, described the charges as an "important and positive development".
"We have put the police under pressure to pursue the investigation," he added.
A first civil ruling in 2009 found Daly, Murphy and two other men -- including Real IRA founder Michael McKevitt -- liable for the attack and ordered them to pay 1.6 million pounds (USD 2.7 million, 1.9 million euros) in damages to the victims' families.
Daly and Murphy successfully overturned the original ruling and were ordered to face a civil retrial, which ruled they can still be held liable.
Former IRA commander Martin McGuinness on Tuesday controversially attended a state banquet hosted by Queen Elizabeth II in honour of Michael D Higgins, the first Irish president to visit Britain since the republic became independent in 1922.